PUT THE POLITICIANS ON THE MINIMUM WAGE AND WATCH HOW FAST THINGS CHANGE
Civilisation has operated in two ways - To make one part of society more affluent and the other more wretched than would have been the lot of either in a natural state
There are Natural Rights and Civil Rights. Life, Liberty and the Pursuit of Happiness
Where Our Power to Execute Our Natural Rights is Perfect, Government has No Legitimate Jurisdiction
When the Forces for War are Greater than the Forces for Peace   Then the World is in Danger
Politics is not a Dirty Word. It is a Way of Life. How is Your Way of Life Today ?

Farming COOP draws in its horns

Wellcome Trust signals long-term commitment

after Co-op deal

THE Wellcome Trust has signalled its intention to continue investing in British

 

agriculture following its record £249 million purchase of The Co-operative Group’s

 

farming business.

 

The world’s second biggest charitable foundation secured the future of The Co-

 

op’s Farmcare business with the biggest agri-investment deal in the UK to date

 

and one of the largest global deals of its kind.

Farmcare’s 15 farms, covering 15,997 hectares (39,533 acres), mainly of arable

 

land across the country, were put up for sale earlier this year in response to the

 

group’s wider financial turmoil.

 

The package also includes three pack houses, more than 100 residential

 

properties and 27 commercial properties.

 

All existing Farmcare management and employees will transfer with immediate

 

effect and the management structure will remain intact with Wellcome Trust

 

representatives joining the board.  

 

The trust, which fought off competition from major investors at home and abroad,

 

has pledged to invest in the business and maintain services such as Farmcare’s

 

educational Farm to Fork programme.

 

Managing director of investments Peter Pereira Gray made it clear the trust,

 

which spends more than £700m a year on driving improvements in human and

 

animal health, was in it for the long-run and was interested in more than the

 

asset value of the farmland and properties.

 

Great business

 

“We think it is a great business,” he told Farmers Guardian. “It is profitable, it has

 

scale and it plays to a number of our interests in terms of the increasing

 

population and food production.

 

“This is very much being looked at as a long-term business. We bought it as a

 

going concern.

 

“We think there is the potential to further invest in this business, given the well-

 

publicised constraints the original parent company had. There are real

 

opportunities to pick this business up and move it forward.”

 

Mr Pereira Gray cited potential opportunities in developing rural property,

 

renewable energy and tourism beyond the core food production business.

 

He hinted, once the trust had come to terms with its new acquisition, it could be

 

open to further investment in the sector.

 

“If something came onto the market we felt was the right thing at the right time,

 

Wellcome has the financial capacity to increase its exposure to this sector.

 

Equally, we want to digest this particular business now but I would have thought

 

we are more interested in grrowing it from here than in shrinking it,” he said.

 

Farmcare chief executive Richard Quinn described the deal as ‘tremendous’ news

 

for the company and its staff and ends the uncertainty about its future.

 

“This is a good business which is already profitable but we know we can do more

 

with it,” he said.

 

The deal has been widely welcomed within the farming industry, partly for the

 

continuity it brings to the Farmcare business.

 

At a time when  industry confidence is being hit with low prices across most

 

sectors, it is also being seen as a vote of confidence in the long-term potential of

 

the UK farming sector.

 

NFU president Meurig Raymond welcomed the trust’s long-term commitment.

 

“They must have confidence in the industry to invest that much into the largest

 

farming business in the UK.”

 

Analysis – why the deal worked

 

THE Wellcome Trust might not have paid the best price for the Co-op’s farms – but

 

it has given the troubled group and its Farmcare business the continuity and

 

potential for growth both strongly desired.

 

It was always going to be a complicated sale. It was forced, not by anything to do

 

with the health of the Farmcare business, but the dire financial straits the Co-op

 

group found itself in at the start of the year, largely due to the mismanagement of

 

its banking arm.

 

Because of the unique structure of the Farmcare business, which also supplied the

 

Co-op’s retail stores, the group was determined to sell it as a single entity, rather

 

than piecemeal.

 

There was plenty of interest from major investors and landowners at home and

 

abroad. Some, such as inventor James Dyson, would only have been interested in

 

taking on parts of the business.

 

The longer term intentions of the others were unclear.

 

Track record

 

The Wellcome Trust had the funds but also a track record in ‘managing a

 

sustainable investment portfolio’ for the long-run and ‘values are closely aligned

 

to those of The Co-operative’, said Richard Pennycook, the Co-op’s interim group

 

chief executive.

The trust, which is underpinned by a £16.5 billion endowment and spends more

 

than £700 million a year on driving improvements in human and animal health,

 

already owns property valued at £1.8bn, including farms in Cambridgeshire,

 

Hertfordshire and Cheshire.

 

Pledging continuity and investment, it clearly sees the purchase as more than a

 

property asset to accumulate wealth.

 

The business is important too – the farms will be required to return an

 

appropriate investment return over time, said Wellcome managing director of

 

investments Peter Pereira Gray, who will chair Farmcare’s board.

 

With staff and management moving over en bloc, the farms will also continue to

 

supply the Co-op’s stores.

 

The land was sold at an average of about £15,600/hectare (£6,300/acre),

 

including the pack houses and property, compared with average equipped

 

farmland prices of £27,170/ha (£11,000/acre) during the second quarter of this

 

year.

 

Asked if he felt the Trust got a good deal, Mr Pereira Gray said: “We were

 

prepared to pay that price. But as I look at the quality of the business and the fact

 

that it was sold as whole, I think a fair price has been paid and received in the

 

circumstances.”

 

A sign of growing investor confidence in farmland

 

Land agents Bidwells, which advised the Trust on the purchase, said the deal

 

underpinned the recent trend from investors, across the world, to acquire

 

agricultural land.

 

The latest Bidwells Agri-Investment Index (BAII) confirm that UK agricultural

 

property continues to out-perform all other mainstream investment asset classes. 

 

Rural assets let to tenants under a range of tenancy agreements delivered total

 

returns of 18.5% in 2013 according to BAII, matching the ‘exceptional’ return

 

recorded in the stock market. 

 

Rural returns also ‘significantly out-paced’ commercial and residential property.

 

Bidwells Ian Monks said increasingly investors were looking to take a strategic,

 

long term view.

 

“The Agricultural Industry must go forward with adequate funding but this scale

 

of investment is generally unachievable in a single deal,” he said.

 

“Whilst there are generally more large scale deals in parts of the world like

 

Australia, the Wellcome Trust’s acquisition of this farming business which covers

 

15,997 hectares (39,533 acres) is both rare and a sign of investor confidence.”

 

“The Co-operative Group’s farm business (Farmcare Trading Ltd) was an ideal fit

 

for The Wellcome Trust. 

 

“They are investors with a long-term time horizon and one that recognises the

 

importance of responsible stewardship to generate returns over such a timescale.”

Similar Recent Posts by this Author:

Share this post

Share on facebook
Share on google
Share on twitter
Share on linkedin
Share on pinterest
Share on print
Share on email